SIGMA DESIGNS, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 12, 1998
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Sigma
Designs, Inc., a California corporation (the "Company"), will be held on
Friday, June 12, 1998 at 2:00 p.m., local time, at the principal executive
offices of the Company at 46501 Landing Parkway, Fremont, California 94538, for
the following purposes:
1. To elect three (3) directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's 1984 Employee Stock Purchase
Plan, as amended, to increase the number of shares of Common Stock of the
Company issuable thereunder by 100,000 to a total of 300,000 shares.
3. To ratify the appointment of Deloitte & Touche LLP as independent auditors
of the Company for the fiscal year ending January 31, 1999.
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 15, 1998 are
entitled to receive notice of, to attend and to vote at the meeting and any
adjournment thereof.
All shareholders are cordially invited to attend the meeting in person.
Any shareholder attending the meeting may vote in person even if such
shareholder returned a proxy.
FOR THE BOARD OF DIRECTORS
Thinh Q. Tran
Chairman of the Board of Directors,
President and Chief Executive Officer
Fremont, California
May 15, 1998
IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
<PAGE>
SIGMA DESIGNS, INC.
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of
Sigma Designs, Inc. (the "Company") for use at the Company's Annual Meeting of
Shareholders (the "Annual Meeting") to be held Friday, June 12, 1998, at 2:00
p.m., local time, or at any adjournment(s) or postponement(s) thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the principal executive
offices of the Company at 46501 Landing Parkway, Fremont, California 94538. The
Company's telephone number is (510) 770-0100.
These proxy solicitation materials were mailed on or about May 15, 1998 to
all shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
Purposes of the Annual Meeting
The purposes of the Annual Meeting are (i) to elect three (3) directors to
serve for the ensuing year and until their successors are duly elected and
qualified; (ii) to increase the number of shares of Common Stock of the Company
reserved for issuance under the 1984 Employee Stock Purchase Plan by 100,000 to
a total of 300,000 shares; (iii) to ratify the appointment of Deloitte & Touche
LLP as independent auditors of the Company for the fiscal year ending January
31, 1999; and (iv) to transact such other business as may properly come before
the meeting or any adjournment thereof.
Record Date and Shares Outstanding
Shareholders of record at the close of business on April 15, 1998 (the
"Record Date") are entitled to notice of, and to vote at the Annual Meeting. At
the Record Date, 11,905,974 shares of the Company's Common Stock were
outstanding.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Attending the
Annual Meeting in and of itself will not constitute a revocation of proxy.
Voting and Solicitation
Every shareholder voting in the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the shareholder's shares are entitled, or distribute such shareholder's votes
on the same principle among as many candidates as the shareholder may select,
provided that votes cannot be cast for more than three (3) candidates. However,
no shareholder shall be entitled to cumulate votes unless the candidate's name
has been placed in nomination prior to the voting and the shareholder, or any
other shareholder, has given notice at the Annual Meeting prior to the voting
of the intention to cumulate the shareholder's votes. On all other matters,
each share has one vote.
Shares of Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated thereon. In the absence of specific instructions to
the contrary, properly executed proxies will be voted: (i) FOR the election of
each of the Company's nominees as a director; (ii) FOR approval of the
amendment to the 1984 Employee Stock Purchase Plan, as amended, to increase the
number of shares available for issuance thereunder by 100,000 to 300,000; and
(iii) FOR ratification of the appointment of Deloitte & Touche LLP as
independent auditors for the fiscal year ending January 31, 1999. No business
other than that set forth in the accompanying Notice of Annual Meeting of
Shareholders is expected to come before the Annual
1
<PAGE>
Meeting. Should any other matter requiring a vote of shareholders properly
arise, the persons named in the enclosed form of proxy will vote such proxy as
the Board of Directors may recommend.
The cost of this solicitation will be borne by the Company. The Company
may reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, telegram or letter.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock outstanding on the Record Date.
Shares that are voted "FOR" or "AGAINST" a matter are treated as being present
at the meeting for purposes of establishing a quorum and are also treated as
votes eligible to be cast by the Common Stock present in person or represented
by proxy at the Annual Meeting and "entitled to vote on the subject matter"
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions or broker non-votes, the Company
believes that both abstentions and broker non-votes should be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. The Company further believes that neither abstentions nor broker
non-votes should be counted as shares "represented and voting" with respect to
a particular matter for purposes of determining the total number of Votes Cast
with respect to such matter. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions and broker non-votes in this
manner. Accordingly, abstentions and broker non-votes will not affect the
determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.
Deadline for Receipt of Shareholder Proposals
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's 1999 Annual Meeting must be
received by the Company no later than January 15, 1999 in order to be included
in the proxy statement and form of proxy relating to that meeting.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
A board of three (3) directors is to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received
by them for the Company's three (3) nominees named below, all of whom are
presently directors of the Company. In the event that any nominee of the
Company is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the current Board of Directors to fill the vacancy. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Shareholders or until his or her successor has been elected and qualified. It
is not expected that any nominee will be unable or will decline to serve as a
director.
<TABLE>
The Board of Directors has amended the Bylaws to provide for 4 directors.
Julian Nguyen, a director of the Company, resigned in July 1997.
The name of and certain information regarding each nominee is set forth
below.
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- -------------------------------- ----- ------------------------------------------------ ---------
<S> <C> <C> <C>
Thinh Q. Tran .................. 44 Chairman of the Board, President and Chief 1982
Executive Officer of the Company
William J. Almon(1)(2) ......... 65 Chairman of the Board and Chief Executive 1994
Officer of StorMedia, Inc.
William Wang(1)(2) ............. 34 Chairman of the Board, Chief Executive Officer 1995
and President of Diva Technology
<FN>
- --------------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</FN>
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation described above during the past five (5) years. There are
no family relationships among the directors or executive officers of the
Company.
Mr. Tran, a founder of the Company, has served as Chairman of the Board,
President and Chief Executive Officer since February 1982. Prior to joining the
Company, Mr. Tran was employed by Amdahl Corporation and Trilogy Systems
Corporation, both of which were involved in the IBM-compatible mainframe
computer market.
Mr. Almon has served as a Director of the Company since April 1994. Since
May 1994, he has served as President and Chief Executive Officer and a Director
of StorMedia Inc., a manufacturer of thin film disks. From December 1989 until
February 1993, Mr. Almon served as President of Conner Peripherals, Inc., a
manufacturer of computer disk drives and storage management devices. From 1958
until 1987, Mr. Almon held various management positions with IBM Corporation,
most recently as Vice President, Low End Storage Products. Mr. Almon also
serves as a Director of Read-Rite Corporation and International Marketing
Services, Inc.
Mr. Wang has served as a Director of the Company since December 1995. From
January 1995 to the present, Mr. Wang has served as Chairman of the Board,
Chief Executive Officer and President of Diva Technology and has served since
January 1996 as a Director of Diva LABS. From 1990 to April 1997, Mr. Wang
served as Chairman of the Board and Chief Executive Officer of MAG Innovision
Co., Inc., a supplier of computer monitors. From 1986 until 1990, Mr. Wang
worked at Tatung Company of America in the Video Display Division.
Required Vote
The three (3) nominees receiving the highest number of affirmative votes
of the shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any
3
<PAGE>
director are counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but have no further legal effect in the
election of directors under California law.
Board Meetings and Committees
The Board of Directors of the Company held a total of four (4) meetings
during the fiscal year ended January 31, 1998 (the "Last Fiscal Year"). No
incumbent director attended less than 75% of the aggregate of all meetings of
the Board of Directors and any committees of the Board on which he served, if
any, during his tenure as a director. The Board of Directors has an Audit
Committee and a Compensation Committee. It does not have a nominating committee
or a committee performing the functions of a nominating committee.
The Audit Committee of the Board of Directors, currently consisting of Mr.
Almon and Mr. Wang, met once during the Last Fiscal Year. The Audit Committee
recommends engagement of the Company's independent auditors, and is primarily
responsible for approving the services performed by the Company's independent
auditors and for reviewing and evaluating the Company's accounting policies and
its systems of internal accounting controls.
The Compensation Committee of the Board of Directors, currently consisting
of Mr. Almon and Mr. Wang, met once during the Last Fiscal Year. The
Compensation Committee reviews and makes recommendations to the Board
concerning the Company's executive compensation policy.
Compensation of Directors
Members of the Board of Directors are currently compensated at the rate of
$500 per Board meeting attended plus out-of-pocket expenses related to the
attendance at such meetings. During the Last Fiscal Year, Mr. Almon and Mr.
Wang were automatically granted options to purchase 10,000 shares of the
Company's Common Stock at an exercise price of $2.56 per share pursuant to the
Company's 1994 Director Option Plan as amended in 1997.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved an amendment to the 1984 Employee
Stock Purchase Plan, as amended, (the "Purchase Plan") to increase the number
of shares which may be issued under the Purchase Plan from 200,000 to 300,000
in order to ensure that the Company has sufficient shares authorized under its
Purchase Plan to attract and retain qualified personnel. As of January 31,
1998, 175,769 shares of Sigma Designs Common Stock had been purchased under the
Purchase Plan and 24,231 shares of Sigma Designs Common Stock remained
available for purchase under the Purchase Plan.
Description of the Purchase Plan
General
The Purchase Plan provides for the opportunity to purchase Sigma Designs
Common Stock through accumulated payroll deductions. The Purchase Plan is
intended to qualify as an "Employee Stock Purchase Plan" under Section 423 of
the Code.
The Purchase Plan was adopted to provide a means for employees of Sigma
Designs to be given an opportunity to purchase stock in Sigma Designs, to
assist in retaining the services of employees, to secure and retain services of
persons capable of filling such positions, and to provide incentives for such
persons to exert maximum efforts for the success of Sigma Designs.
Administration
The Purchase Plan provides that it is to be administered by the Sigma
Designs Board and authorizes the Board to delegate such administration to a
committee of two or more directors, each of whom shall
4
<PAGE>
be disinterested within the meaning of Rule 16b-3 under the Exchange Act. As
used herein with respect to the Purchase Plan, the "Sigma Designs Board" refers
to the Compensation Committee as well as the Sigma Designs Board itself. The
Sigma Designs Board has the power to construe and interpret the Purchase Plan.
The Sigma Designs Board has delegated such administration to the Sigma Designs
Compensation Committee.
Eligibility
Sigma Designs employees are eligible to participate in the Purchase Plan
if they are customarily employed by Sigma Designs or any participating
subsidiary for at least 20 hours per week and more than five months in any
calendar year.
Offering Periods
The Purchase Plan has two six-month offering periods each year beginning
on the first trading day on or after January 1 and July 1, respectively, of
each year.
Participation in Purchase Plan
<TABLE>
An eligible employee may participate in the Purchase Plan by completing a
subscription agreement authorizing payroll deductions, in an amount not
exceeding ten percent of such employee's compensation in a single pay period up
to a maximum of ten percent of such employee's total compensation during the
offering period. Participation in the Purchase Plan is voluntary and is
dependent on each eligible employee's election to participate and his or her
respective determination as to the level of payroll deductions. Accordingly,
future purchases under the Purchase Plan are not determinable. None of the
Named Officers participated in the plan during the last fiscal year. The
following table sets forth as to all current executive officers as a group and
all other employees who participated in the Purchase Plan: (i) the number of
shares of Sigma Designs Common Stock purchased under the Purchase Plan during
the last fiscal year; and (ii) the dollar value of the benefit:
<CAPTION>
Name of Individual or Number of Shares Dollar Value
Identity of Group and Position Purchased (#) ($)(1)
- -------------------------------------------------------------- ------------------ -------------
<S> <C> <C>
All current executive officers as a group (1 person) ......... 2,533 1,495
All other employees as a group ............................... 36,133 21,320
<FN>
- ------------
(1) Market value of shares on date of purchase, minus the purchase price under
the Purchase Plan.
</FN>
</TABLE>
Purchase Price
The purchase price under the Purchase Plan shall be an amount equal to 85%
of the fair market value of a share of Common Stock on the enrollment date or
the exercise date, whichever is lower (subject to any limit imposed by the
Code).
Adjustment Provisions
If there is any change in the stock subject to the Purchase Plan (through
merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
otherwise), will be appropriately adjusted as to the class and the maximum
number of shares subject to such plan and the class, number of shares, and
price per share of stock subject outstanding options.
Effect of Certain Corporation Events
The Purchase Plan provides that in the event of a proposed sale of all or
substantially all of the assets of Sigma Designs, or a merger of Sigma Designs
with or into another corporation, the offering period then in effect shall be
shortened by setting a new exercise date, which shall be before the date of
Sigma Designs' proposed sale or merger. The offering period in effect at the
Effective Time will be terminated immediately prior to the Effective Time and
shares of Sigma Designs Common Stock will be issued thereunder. Subsequently, a
new offering period will commence five days after the Effective Time and will
end at the time provided for in the Purchase Plan.
5
<PAGE>
Duration, Amendment and Termination
The term of the Purchase Plan shall continue in effect until 2006. The
Sigma Designs Board may suspend or terminate the Purchase Plan without
stockholder approval or ratification at any time or from time to time. The
Board may also amend the Purchase Plan at any time or from time to time.
Transferability
Rights granted under the Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution or as
otherwise provided under the Purchase Plan.
Tax Information
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of shares. Upon disposition of
the shares, the participant will generally be subject to tax and the amount of
the tax will depend upon the holding period.
If the shares have been held by the participant for more than two years
after the date of option grant and for more than one year after the date of
purchase, the lesser of (a) the excess of the fair market value of the shares
at the time of such disposition over the purchase price or (b) the excess of
the fair market value of the shares at the date of commencement of the offering
period over the exercise price, will be treated as ordinary income. Any further
gain or loss will be taxed as a long-term gain or loss. If the shares are sold
and the sale price is less than the purchase price, there is no ordinary income
and the participant has a capital loss for the difference. If the shares are
disposed of before the expiration of these holding periods, the excess of the
fair market value of the shares on the purchase date over the purchase price
will be treated as ordinary income, and any further gain or loss on such
disposition will be long-term or short-term capital gain or loss, depending on
the holding period.
Different rules may apply with respect to participants subject to Section
16 of the Exchange Act.
Sigma Designs is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
recognized by participants upon dispositions of shares prior to the expiration
of the holding periods described above.
The foregoing is only a brief summary of the effect of federal income
taxation upon the participant and Sigma Designs with respect to the shares
purchased under the Purchase Plan, does not purport to be complete, and does
not discuss the tax consequences of a participant's death or the income tax
laws of any municipality, state or foreign country in which a participant may
reside.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1984 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending January 31, 1999 and recommends that shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements for
each fiscal year since the Company's inception. Its representatives are
expected to be present at the meeting, will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond
to appropriate questions.
Required Vote; Recommendation of the Board of Directors
The affirmative vote of the holders of a majority of the Common Stock
present or represented at the meeting is required to approve the foregoing
proposal.
6
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT
OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING JANUARY 31, 1999.
OTHER INFORMATION
Executive Officers
<TABLE>
In addition to Mr. Tran, the following persons were executive officers
during the Last Fiscal Year and executive officers of the Company as of the
Record Date:
<CAPTION>
Name Age Position
- ----------------------------- ----- -----------------------------------------------------------
<S> <C> <C>
Silvio Perich ............... 49 Senior Vice President, Worldwide Sales
Jacques Martinella .......... 42 Vice President, Engineering
Prem Talreja ................ 44 Vice President, Marketing (1)
Kit Tsui .................... 48 Director of Finance, Chief Financial Officer and Secretary
<FN>
- ------------
(1) Mr. Talreja resigned from the Company effective as of April 24, 1998.
</FN>
</TABLE>
Mr. Perich joined the Company in September 1985 as Director, Sales. In
September 1992, Mr. Perich became Senior Vice President, Worldwide Sales. Mr.
Perich was a co-founder of Costar Incorporated, a manufacturer's representative
organization for high technology products, where he served as partner from
October 1979 to September 1985. From September 1972 until September 1979, Mr.
Perich served in several sales management roles at Siliconix Inc., a specialty
semiconductor manufacturer.
Mr. Martinella joined the Company in May 1994 as Director, VLSI
Engineering. In December 1995, Mr. Martinella became Vice President,
Engineering. From June 1990 to April 1994, Mr. Martinella served in various
engineering and management positions at Weitek, a microchip manufacturer. In
addition, Mr. Martinella was an engineer at National Semiconductor, a
semiconductor manufacturer, from June 1982 to June 1990.
Mr. Talreja joined the Company in March 1996 as Vice President, Marketing
and resigned from the Company effective April 24, 1998. From June 1994 to
February 1996, Mr. Talreja was Director, Marketing of OPTi, Inc., an ASIC
design company. From April 1991 to May 1994, Mr. Talreja was Marketing Manager
of Cirrus Logic, Inc., a diversified semiconductor company. From June 1988 to
March 1991, Mr. Talreja was Vice President, Marketing of Able Communications, a
private telecommunications company. From January 1984 to May 1988, Mr. Talreja
was Marketing Manager of Siemens Semiconductor, a semiconductor company. From
January 1979 to April 1988, Mr. Talreja was Product Marketing Manager of Inmos
Corporation, an ASIC design company.
Ms. Tsui joined the Company in November 1982 as its Accounting Manager. Ms.
Tsui was promoted to Director of Finance in February 1990, became Acting Chief
Financial Officer and Secretary in December 1996 and became Chief Financial
Officer in July 1997.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file certain
reports regarding ownership of, and transactions in, the Company's securities
with the Securities and Exchange Commission and with the National Association
of Securities Dealers. Such officers, directors, and 10% shareholders are also
required to furnish the Company with copies of all Section 16(a) forms that
they file.
Based solely on its review of copies of Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and
amendments thereto furnished to the Company with respect to the Last Fiscal
Year, and any written representations referred to in Item 405(b)(2)(i) of
Regulation S-K stating that no Forms 5 were required, the Company believes
that, during the Last Fiscal Year, all Section 16(a) filing requirements
applicable to the Company's officers, directors and 10% shareholders were
complied with.
7
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
<TABLE>
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) the
Company's Chief Executive Officer and each of the three other most highly
compensated individuals who served as executive officers of the Company at
fiscal year end (the "Named Officers") and (iv) all individuals who served as
directors or executive officers at fiscal year end as a group:
<CAPTION>
Shares Beneficially
Owned(1)(2)
------------------------
Name Number Percent
- ------------------------------------------------------------------ ----------- ----------
<S> <C> <C>
The TWC Group, Inc.(3) ........................................... 1,171,800 8.95%
865 South Figueroa Street
Los Angeles, CA 90017
Thinh Q. Tran(4) ................................................. 908,824 6.9%
Silvio Perich(5) ................................................. 150,146 1.1
Jacques Martinella(6) ............................................ 44,922 *
Prem Talreja(7)(8) ............................................... 25,233 *
Dan Chen (9) ..................................................... 118,965 *
William J. Almon(10) ............................................. 22,250 *
William Wang(11) ................................................. 7,500 *
All Directors and Executive Officers at fiscal year end as a group
(8 persons)(12) ................................................. 1,329,481 10%
<FN>
- ------------
* Less than 1%.
(1) The number and percentage of shares beneficially owned is determined under
rules of the Securities and Exchange Commission, and the information is
not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also
any shares which the individual has the right to acquire within sixty (60)
days of April 15, 1998 through the exercise of any stock option or other
right.
(2) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to this table. Unless otherwise noted, the
address for all persons shall be the principal executive office of the
Company.
(3) Based solely upon filings made by such shareholder with the Securities and
Exchange Commission.
(4) Includes 391,333 shares issuable upon exercise of outstanding options
which were exercisable at April 15, 1998 or within sixty (60) days
thereafter.
(5) Includes 147,416 shares issuable upon the exercise of outstanding options
which were exercisable at April 15, 1998 or within sixty (60) days
thereafter.
(6) Includes 44,922 shares issuable upon the exercise of outstanding options
which were exercisable at April 15, 1998 or within sixty (60) days
thereafter.
(7) Includes 24,500 shares issuable upon the exercise of outstanding options
which were exercisable at April 15, 1998 or within sixty (60) days
thereafter.
(8) Mr. Talreja resigned from the Company effective as of April 24, 1998.
(9) Dr. Chen left the employ of the Company in November 1997.
(10) Includes 11,250 shares issuable upon the exercise of outstanding options
which were exercisable at April 15, 1998 or within sixty (60) days
thereafter.
(11) Includes 7,500 shares issuable upon the exercise of outstanding options
which were exercisable at April 15, 1998 or within sixty (60) days
thereafter.
(12) Includes 658,927 shares issuable upon the exercise of outstanding options
held by eight (8) officers and directors which were exercisable at April
15, 1998 or within sixty (60) days thereafter.
</FN>
</TABLE>
8
<PAGE>
Executive Compensation
<TABLE>
The following table shows, as to each of the Named Officers, information
concerning compensation paid for services to the Company in all capacities
during the three fiscal years ended January 31, 1998:
Summary Compensation Table
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
--------------------------------------- ----------------------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary Bonus Options(#) Compensation
- ----------------------------- -------- ------------------ ------------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Thinh Q. Tran ............... 1998 $ 215,816 -- 320,000 --
Chairman of the Board, 1997 186,923 -- -- --
President and Chief 1996 179,654 -- 120,000 --
Executive Officer
Silvio Perich ............... 1998 $ 131,250 $ 11,299 (1) 35,000 --
Senior Vice President, 1997 103,769 57,621 (1) -- --
Worldwide Sales 1996 100,000 69,854 (1) 50,000 --
Jacques Martinella. ......... 1998 $ 136,500 $ 27,100 (2) 50,000 --
Vice President, Engineering 1997 127,261 10,000 (2) -- --
1996 111,840 -- 13,882 --
Prem Talreja (3). ........... 1998 $ 131,250 $ 33,612 (4) 30,000 --
Vice President, Marketing 1997 106,846 (5) -- 40,000 --
1996 -- -- --
Dan Chen(6) ................. 1998 $ 119,680 (7) -- -- --
Vice President, Engineering 1997 83,368 (7) -- 160,400 --
1996 -- -- -- --
<FN>
- ------------
(1) Represents total amount of commission paid to Mr. Perich for such fiscal
year.
(2) Represents a performance bonus paid to Mr. Martinella for such fiscal year.
(3) Mr. Talreja resigned from the Company effective as of April 24, 1998.
(4) Represents a performance bonus paid to Mr. Talreja for the fiscal year ended
January 31, 1998.
(5) Mr. Talreja joined the Company in March 1996. This amount represents the
total amount of salary paid to Mr. Talreja for the fiscal year ended January
31, 1997.
(6) Dr. Chen joined the Company in May 1996 and left the employ of the Company
in November 1997.
(7) This amount represents the total amount of salary paid to Mr. Chen for such
fiscal year.
</FN>
</TABLE>
9
<PAGE>
<TABLE>
The following table shows, as to each of the Named Officers, option grants
during the Last Fiscal Year and the potential realizable value of options,
assuming 5% and 10% appreciation, at the end of their term:
Individual Grants
<CAPTION>
Potential Realizable
Value at
Number of % of Total Assumed Annual Rates of
Securities Options Granted Stock
Underlying to Employees in Exercise Expiration ------------------------
Name Options Granted Fiscal Year(1) Price Date 5%(2) 10%(2)
- ---------------------------- ------------------------ ----------------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thinh Q.Tran ............... 120,000 (3)(4) 5.37% $ 2.31 4/22/07 $174,330 $ 441,785
62,459 (3)(4) 2.79 2.31 4/22/07 90,737 229,946
297,541 (3)(4) 13.31 2.31 4/22/07 432,252 1,095,411
320,000 (3) 14.31 2.31 4/22/07 464,879 1,178,094
Silvio Perich .............. 20,000 (3)(4) 0.89 2.31 4/22/07 29,055 73,631
30,000 (3)(4) 1.34 2.31 4/22/07 43,582 110,446
50,000 (3)(4) 2.24 2.31 4/22/07 72,637 184,077
70,000 (3)(4) 3.13 2.31 4/22/07 101,692 257,708
35,000 (3) 1.57 2.31 4/22/07 50,846 128,854
Jacques Martinella ......... 3,882 (3)(4) 0.17 2.31 4/22/07 5,640 14,292
10,000 (3)(4) 0.45 2.31 4/22/07 14,528 36,815
10,000 (3)(4) 0.45 2.31 4/22/07 14,527 36,815
22,500 (3)(4) 1.01 2.31 4/22/07 32,687 82,835
50,000 (3) 2.24 2.31 4/22/07 72,637 184,077
Prem Talreja ............... 40,000 (3)(4) 1.79 2.31 4/22/07 58,110 147,262
30,000 (3) 1.34 2.31 4/22/07 43,582 110,446
Dan Chen ................... 0 -- -- -- -- --
------- ----- ------- ------- -------- ---------
<FN>
- ------------
(1) The Company granted options representing 2,235,779 shares to employees in
the Last Fiscal Year under the Company's 1994 Stock Plan including
1,167,779 options granted in exchange for the cancellation of the same
number of outstanding options as of April 22, 1997 on a one-for-one basis
pursuant to the Exchange Program.
(2) The 5% and 10% assumed annual rates of appreciation are mandated by the
rules of the of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
price.
(3) These options were granted under the Company's 1994 Stock Plan and have
exercise prices equal to the fair market value on the date of grant. The
options become exercisable cumulatively over a period of five (5) years at
the rate of twenty percent (20%) of the shares one (1) year after the
vesting commencement date specified in the grants and one-sixtieth ( 1/60
) of the shares each month thereafter for the next four (4) years. The
options expire ten (10) years from the date of grant. The 1994 Stock Plan
is currently administered by the Board of Directors, except for grants to
executive officers, which are administered by the Compensation Committee.
The Board of Directors and the Compensation Committee have broad
discretion and authority to amend outstanding options and to reprice
options, whether through an exchange of options or an amendment thereto.
Grants under the Stock Plan are made at the discretion of the Board of
Directors; accordingly, future grants under the Stock Plan are not yet
determinable.
(4) Grants of stock options pursuant to the Exchange Program in exchange for
the cancellation of outstanding stock options.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
The following table shows, as to each of the Named Officers, information
concerning options exercised during the Last Fiscal Year and the value of
options held at fiscal year end:
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-money Options at
Options at Fiscal Year End Fiscal Year End(1)
Acquired on Value Realized ------------------------------- ------------------------------
Name Exercise(#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- ------------- ---------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Thinh Q. Tran .............. -- -- 281,333 518,667 $247,010 $455,390
Silvio Perich .............. -- -- 132,666 72,334 116,481 63,509
Jacques Martinella ......... -- -- 30,882 65,500 27,114 57,509
Prem Talreja ............... -- -- 14,666 55,334 12,877 48,583
Dan Chen ................... 68,200 368,280 -- -- -- --
<FN>
- ------------
(1) Calculated by determining the difference between the closing price of the
securities underlying the options at January 31, 1998 ($3.188) as reported
on the Nasdaq National Market and the exercise price of the options.
</FN>
</TABLE>
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company as well as the compensation plans
and specific compensation levels for executive officers. It also administers
the Company's employee stock benefit plan for executive officers. The
Compensation Committee is currently composed of independent, non-employee
directors who have no interlocking relationships as defined by the Securities
and Exchange Commission.
The Compensation Committee believes that the compensation of the executive
officers, including that of the Chief Executive Officer (collectively, the
"Executive Officers") should be influenced by the Company's performance. The
Committee establishes the salaries of all of the Executive Officers by
considering (i) the Company's financial performance for the past year, (ii) the
achievement of certain objectives related to the particular Executive Officer's
area of responsibility, (iii) the salaries of executive officers in similar
positions of comparably-sized companies and (iv) the relationship between
revenue and executive officer compensation. The Committee believes that the
Company's executive officer salaries in the last fiscal year were comparable in
the industry for similarly-sized business.
In addition to salary, the Committee, from time to time, grants options to
Executive Officers. The Committee thus views stock option grants as an
important component of its long-term, performance-based compensation
philosophy. Since the value of an option bears a direct relationship to the
Company's stock price, the Committee believes that options motivate Executive
Officers to manage the Company in a manner which will also benefit
shareholders. As such, options are granted at the current market price. One of
the principal factors considered in granting stock options to an Executive
Officer is the Executive Officer's ability to influence the Company's long-term
growth and profitability.
Chief Executive Officer Compensation
Thinh Q. Tran, in his capacity as the Chief Executive Officer,
participates in the same compensation programs as the other Named Officers. The
Compensation Committee has targeted Mr. Tran's total compensation, including
compensation derived from the stock option plan, at a level it believes is
competitive with the average amount paid by other multimedia software and
hardware companies with similar revenues and growth rates.
Mr. Tran's annual base salary was increased from approximately $187,000 to
$216,000 in fiscal 1998 primarily based on his efforts to improve Company
performance during fiscal 1998. In particular, the Compensation Committee based
its decision on Mr. Tran's efforts to increase revenues and market share in an
increasingly competitive market, including contributions to continued releases
of new products and product updates. The Compensation Committee also considered
the need to offer Mr. Tran a competitive
11
<PAGE>
salary in order to retain him in a geographic market where demand for qualified
Chief Executive Officers is intense. The Committee believes the stock option
grant to Mr. Tran during fiscal 1998 is competitive in the industry and a
necessary retention component.
Stock Option Exchange
In April 1997, the Board of Directors offered to all employees (including
the Named Officers) the opportunity to cancel outstanding stock options with
exercise prices in excess of $2.31 per share (the fair market value of the
common stock at that time) in exchange for options exercisable at $2.31 per
share which were otherwise identical to the canceled options except for an
initial 6-month window in which no options could be exercised. The option
exchange was an acknowledgment of the importance to the Company of having
equity incentive in the hands of key employees. Stock options which are "out of
the money" provide no particular compensatory incentive if an employee is
considering alternative opportunities. The Committee decided to include the
Named Officers in the exchange because of the importance of their
administrative and technical leadership to the success of the Company's
business.
<TABLE>
The following table sets forth all exchange and repricings of officer
stock options since the Com-pany's initial public offering in May 1986.
Ten-Year Option Repricings Table
<CAPTION>
Length of
Market Original
Number of Price of Option Term
Securities Stock of Remaining at
Underlying/ Time of Date of
SARs Repricing New Repricing or
Repriced or or Original Exercise Amended
Date of Amended Amended Price Price ---------------
Name and Position Repricing (#) ($) ($) ($) Year Month
- --------------------------------- ----------- ------------- ----------- ---------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Martinella, Jacques 4/22/97 10,000 2.31 5.5 2.31 7 9
Vice President, 4/22/97 22,500 2.31 4.88 2.31 3 4
Engineering 4/22/97 3,882 2.31 4.25 2.31 8 1
4/22/97 10,000 2.31 4.38 2.31 8 6
Perich, Silvio 4/22/97 70,000 2.31 4.25 2.31 1 3
Senior Vice President 4/22/97 30,000 2.31 3.75 2.31 2 4
Worldwide Sales 4/22/97 20,000 2.31 4.88 2.31 3 4
4/22/97 50,000 2.31 4.38 2.31 8 6
7/2/92 80,000 4.25 3.38 4.25 0 1
Talreja, Prem 4/22/97 40,00 2.31 8.75 2.31 9 0
Vice President Marketing
Tran, Thinh 4/22/97 297,541 2.31 4.88 2.31 7 4
Chairman of the Board, 4/22/97 62,459 2.31 4.88 2.31 7 4
President and Executive Officer 4/22/97 120,000 2.31 4.38 2.31 8 6
7/2/92 40,000 4.25 8.5 4.25 2 7
Tsui, Kit 4/22/97 5,000 2.31 5.5 2.31 7 9
Director of Finance, Chief 4/22/97 5,000 2.31 3.5 2.31 2 3
Financial Officer and Secretary 4/22/97 5,000 2.31 3.75 2.31 2 4
4/22/97 1,591 2.31 4.25 2.31 8 1
4/22/97 5,000 2.31 4.38 2.31 8 6
4/22/97 5,000 2.31 5.63 2.31 8 8
4/22/97 15,000 2.31 7.63 2.31 9 6
10/17/90 12,000 4.75 8.38 4.75 5 2
</TABLE>
12
<PAGE>
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
William J. Almon
William Wang
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of William J. Almon and William Wang,
each of whom is an independent, non-employee director. No executive officer of
the Company serves as a member of the Board of Directors or Compensation
Committee of any entity which has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
Company Stock Price Performance
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, for the five-year period
beginning January 29, 1993 and ending January 30, 1998 for the Company, the
CRSP Index for the Nasdaq Stock Market (U.S. Companies) (the "Nasdaq Index")
and the CRSP Index for Computer Manufacturers' Stocks (the "Nasdaq Computer
Manufacturers' Index"). The graph assumes that $100 was invested in the
Company's Common Stock on January 29, 1993 and in the Nasdaq Index and the
Nasdaq Computer Manufacturers' Index on January 29, 1993. Note that historic
stock price performance is not necessarily indicative of future stock price
performance.
<TABLE>
Comparison of Five-Year Cumulative Total Returns
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<CAPTION>
1/29/93 1/31/94 1/31/95 1/31/96 1/31/97 1/30/98
<S> <C> <C> <C> <C> <C> <C>
Sigma Designs, Inc. 100.0 219.2 101.9 118.3 155.8 49.0
Nasdaq Stock Market 100.0 115.0 109.7 155.1 203.3 240.4
Nasdaq Computer Manufacturers Stocks 100.0 94.6 96.8 156.5 227.9 276.6
</TABLE>
Notes:
A. The lines represent yearly index levels derived from compounded daily
returns that include all dividends.
B. If the yearly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
C. The index level for all series was set to $100.0 on 01/29/93.
The Stock Price Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement (or any portion thereof) into any filing under the Securities Act of
1993 or the Securities Exchange Act of 1934, except to the extent the Company
specifically incorporated this performance by reference, and shall not
otherwise by deemed filed under such Acts.
13
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
It is important that your stock be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to execute
and return the accompanying proxy in the envelope which has been enclosed, at
your earliest convenience.
FOR THE BOARD OF DIRECTORS
Thinh Q. Tran
Chairman of the Board of Directors,
President and Chief Executive Officer
Dated: May 15, 1998
14
<PAGE>
APPENDIX A
PROXY SIGMA DESIGNS, INC. PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
June 12, 1998
The undersigned shareholder of Sigma Designs, Inc. (the "Company"), hereby
appoints Thinh Q. Tran and Kit Tsui and each of them, with power of
substitution to each, true and lawful attorneys, agents and proxyholders of the
undersigned, and hereby authorizes them to represent and vote, as specified
herein, all the shares of Common Stock of the Company held of record by the
undersigned on April 15, 1998, at the 1998 Annual Meeting of Shareholders of
the Company to be held on Friday, June 12, 1998 at 2:00 p.m., local time, at
the Company's principal executive offices at 46501 Landing Parkway, Fremont,
California 94538, and any adjournments or postponements thereof.
(Continued, and to be signed on the other side)
- FOLD AND DETACH HERE -
<PAGE>
WITHHOLD
FOR ALL
1. ELECTION OF DIRECTORS: [ ] [ ]
Nominees: Thinh Q. Tran,
William J. Almon and
William Wang
INSTRUCTION: If you wish to withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.
-----------------------------------------------------------------------------
<TABLE>
[X] Please mark
your votes
as this
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Amendment to 1984 Employee Stock Purchase Plan, as amended, in order to [ ] [ ] [ ]
increase the number of shares of Common Stock issuable thereunder by
100,000 to a total of 300,000.
3. APPOINTMENT OF INDEPENDENT AUDITORS [ ] [ ] [ ]
To ratify the appointment of Deloitte & Touche LLP as independent auditors of
the Company for the fiscal year ending January 31, 1999.
</TABLE>
4. In their discretion, the proxyholders are authorized to vote upon such other
business as may properly come before the meeting, or any adjournments or
postponements thereof.
The shares represented by this proxy will be voted in the manner directed. In
the absence of any direction, the shares will be voted FOR Proposals 1, 2 and 3.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders, Proxy Statement dated May 15, 1998 and 1998 Annual Report to
Shareholders.
Please mark, sign and date this proxy and return it promptly whether you plan to
attend the meeting or not. If you do attend, you may vote in person if you
desire.
Signature(s) Dated , 1998
------------------------------------------ -------------
Please sign exactly as name appears hereon. Joint owners should each sign.
Trustees and others acting in a representative capacity should indicate the
capacity in which they sign and give their full title. If a corporation, please
sign in full corporate name by an authorized officer. If a partnership please
sign in partnership name by an authorized person.
- FOLD AND DETACH HERE -
